Governments Failing the Building Industry 5

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Wednesday, October 14th, 2015
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Substandard construction work has been identified by the University of New South Wales in 85 per cent of apartment buildings built since 2000.

The recent Australian Consumer Survey report indicated that 28 per cent of consumers in Australia had experienced a building problem. The most common was poor workmanship, which accounted for 63 per cent of the problems and which is not covered under any warranty regime.

The decline in the Australian building industry came after the NSW and Victorian Governments introduced the HIA mandatory Builders Warranty Insurance (BWI) scheme in 2002 as described by each in this transcript, and its principles were based on this 10-Point Plan.

The 10-point plan was put into effect after the huge backlash from the industry and it was the big commercial builders who won the day, and had buildings of three levels and above removed from the warranty scheme.

This was followed by the large domestic builders who suddenly didn’t have a problem with the levels of eligibility they required, leaving only the vast majority of domestic builders to suffer under the BWI regime. They didn’t have a unified voice, which saw many fail because of this scheme.

So the big became bigger at the cost of the smaller builder, and we now see the estate builders dominate the suburbs, which had always been the domain of the mum and dad builders who employed many of our apprentices.

We have witnessed the decline in entry standards to our industry, allowing the “get rich quick” mentality to flourish and tarnishing the industry’s reputation.

Is it truly shocking that 85 per cent of high-rise construction in NSW has been found to be substandard?

There are no surprises here, as these Governments were to establish a catastrophe fund for hi-rise buildings under the 10-point plan (point four of the plan) but failed to do so due to pressure from the big end of town.

Then under point nine of the plan, we find the insurer’s liability will be capped at $10 million and government will pick up the tab for anything over. More accurately, our industry would fund it, as builders and insurers would subsidise the catastrophe fund. This arrangement was to apply to the catastrophe at point four as well but it was not put in place and never eventuated.

The vast majority of the nation’s builders – some 95 per cent – are the silent majority who suffer in silence as to question may see them lose their livelihood under the BWI regime.

Any dodgy scheme will eventually come home to roost, and after 13 years that time has finally come.

It’s now time for governments to listen to the legitimate industry, for high-rise builders to be accountable and contribute, for the rent seekers to butt out of our industry, and for newfound respect for our consumers

It’s now time to regulate our industry, and remove those who abuse it.

New South Wales is now considering imposing a two per cent levy on the high-rise builders to fund consumer protection, however that’s something they should have done back in 2002 as described in the 10-point plan.

If that is the case, then they should dump the warranty scheme and bring all builders under the same scheme, as they cant suggest one scheme is okay for them but we will retain a different scheme for others.

All builders should equally contribute to a genuine consumer protection regime as there should never be “them and us.”

The Northern Territory Government is considering bringing all builders, including hi-rise builders, under the one regime that will be fair and equitable.

Victoria seems to be procrastinating and partial reform will not wash, as total reform is long overdue because this state’s industry is a complete basket case.

It is completely disappointing that there is no aspect of our industry that can hold its head high, and claim a job well done.

Governments, it’s time to act, listen and respect our industr. We want a better industry, and to date you have not demonstrated your capability to deliver that better industry on our behalf.

Its time you did.

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Discussions
5
  1. Peter

    Great article Phil. You managed to compress a whole lot of complex policy into a very readable article.

  2. Anne Paten

    Phil, the pertinent point not mentioned in the VAGO Report of May 2015 is that the 28% figure was for Australia and it referred to those who had 'building problems'. However, the most recent stats for Victoria were reported by CAV in 2010. The salient facts here are that it reported the 38% of owners had suffered FINANCIAL LOSS – not building problems. And in Victoria it was almost 40% – not 28%. As I know you appreciate, there is a very significant difference. Conclusion? Victoria is a bigger basket case than the Australia wide statistics demonstrate. And of course the Vic stats are from 5 years ago, now very outdated. Alarmingly, anecdotal evidence over the past 5 years indicates how much worse the outcomes for consumers are in 2015 – and we know that the BC/VBA – or whatever name the spinners ascribe – has only worsened in every respect. The endemic conflict of interest continues unabated. The officials continue to be recruited from ex Vic Pol and other 'no touch regulators'.. The CEO is from the Depart that created this monster 'policy'. Consumers are ignored, and the VBA masterfully covers up all the facts, burying the Deloitte and PwC reports revealing its atrocious conduct.

    • R. Jones

      Anne Patten should have a position where she could ask questions and get a written reply and both published and then sent to parliament for a written reply to the people . my state MP.N. Wakeling was to busy to see myself. Shaw frankstone MP needed help. R. Jones.

  3. Mark Whitby

    Phil,

    Good compact article. Just 2 points I don't quite understand.

    Isn't the building contract a warranty regime of sorts? Workmanship is covered under the Building Act I thought.

    And as to small builders… didn't their decline occur because of the larger builders' bargaining power with suppliers?

    Cheers Mark

    • Phil Dwyer

      Thanks Mark,

      Yes the building contract should be a form of warranty but in the first instance for a builder to enter into a contract he or she must first obtain warranty insurance eligibility to enable the purchase of the warranty certificate and to activate the licence. In other words warranty insurance is the most powerful aspect of the whole process.

      To act on the contract it requires entry into VCAT, very dangerous ground!!!

      There is no question the warranty insurance regime and its restricions was responsible for the initial and continuing decline of the small builder. Some 6,000 builders marched on the NSW government when this draconion regime was introduced by HIA back in 2002. The HIA response to Government was that they were only the builders that were financially insecure.

      The purchasing power of the large builder also continues to play a role today.